The Best Defense in E-Discovery is a Good OffenseA recent case from the Fifth Circuit interpreting Federal Rule of Civil Procedure 54(d)(1) serves as an important reminder that parties who approach discovery proactively can not only prevail in a lawsuit but also be rewarded for their efforts. The Fifth Circuit recently took up this issue after the U.S. District Court for the Southern District of Texas reduced a prevailing party’s award of discovery costs based on an analysis of the comparative wealth of the parties.

In Moore v. CITGO Refining & Chemicals Co., 735 F.3d 309 (5th Cir. 2013), a wage and hour class action, the district court dismissed the cases of 21 of 24 plaintiffs because they failed to preserve electronically stored information, including e-mails, despite several warnings of the potential for dismissal by the court. The three remaining plaintiffs were prevented from offering any evidence of damages at trial as a sanction, and thus the court granted summary judgment on their claims to the defendant, CITGO.

After prevailing, CITGO asked the court for approximately $50,000 in costs for deposition transcripts and copies under Rule 54(d)(1). This rule allows courts to award costs, excluding attorney’s fees, to prevailing parties unless a federal statute, the Rules themselves, or a court order provides otherwise. The district court acknowledged that CITGO was entitled to the full amount but nonetheless reduced the award to $5,000 because CITGO had “enormous wealth,” while the plaintiffs had only “limited resources,” although they earned six-figure salaries.

The appellate court ruled that the district court abused its discretion by reading a comparative wealth test into Rule 54(d)(1) and ignoring its plain language. If the district court’s decision stood, it “would not only undermine the presumption that Rule 54(d)(1) creates in prevailing parties’ favor, but it would also undermine the foundation of the legal system that justice is administered to all equally, regardless of wealth or status.” The court also acknowledged that the trial court’s “impermissibly punitive” approach would penalize profitable corporations even though they acted in good faith.

CITGO’s proactive approach to discovery in this case outlines a paradigm for other defendants to follow. Parties that understand their discovery obligations, take proactive steps to preserve data, and conduct e-discovery properly—regardless of their size or resources—will find that they can go on the offensive and be rewarded.

Rob Hellewell is vice president at Xerox Litigation Services. He can be reached at info@xls.xerox.com.

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